Stocks to Watch CIMB, Kencana, Hartalega, Grand-Flo

KUALA LUMPUR (May 8): A slew of corporate announcements, including CIMB Group Holdings Bhd's planned acquisition of 60% of Bank of Commerce (BoC) in the Philippines, could help pique investors' appetite at Bursa Malaysia on Wednesday.

Elsewhere, investor sentiment remains on tenterhooks as the weekend results of elections in Europe have raised the specter of the troubles faced by the beleaguered eurozone.

Investors sold European shares and the euro on Tuesday, unnerved by the political stalemate in Greece and the threat of a Franco-German split over policies to tackle the region's debt crisis, according to Reuters.

Among the stocks that could be in focus are CIMB Group Holdings Bhd, KENCANA PETROLEUM BHD [], HARTALEGA HOLDINGS BHD [] and GRAND-FLO SOLUTION BHD [].

CIMB Group Holdings has entered into conditional share purchase agreements (SPA) with San Miguel PROPERTIES [] Inc, San Miguel Corporation Retirement Plan and various minority shareholders for the proposed acquisition of 60% of Bank of Commerce (BoC) in the Philippines. In a statement on Tuesday, CIMB said the acquisition was for the equivalent of RM881 million cash.

Kencana's unit Kencana HL Sdn Bhd has been awarded a RM460 million engineering, procurement, CONSTRUCTION [] and commissioning (EPCC) contract from Murphy Sarawak Oil Co Ltd. In a statement on Bursa Malaysia on Tuesday, it said that Kencana HL had received a letter of award from Murphy for the fabrication of offshore topsides.

Hartalega declared a third interim dividend of six sen per share single tier for the financial year ended March 31, 2012, to be paid on June 13. Its net profit for the fourth quarter ended March 31, 2012 fell 4.55% to RM50.01 million from RM52.39 million a year earlier, despite a 24.77% increase in revenue to RM240.22 million.

The company said on Tuesday that the significant increase in revenue was in line with the continuous expansion in production capacity and increase in demand. However, its bottom line was impacted by the increase in raw material prices of nitrile latex, fuel costs and more competitive sales pricing for the current quarter compared with the corresponding quarter of the preceding year, it said.

Grand-Flo's net profit for the first quarter ended March 31, 2012 rose 5.91% to RM2.22 million from RM2.09 million a year earlier, due mainly to strong tracking solutions sales abroad. It said on Tuesday that its revenue jumped 19.6% to RM20.37 million from RM17.03 million. Meanwhile, earnings per share were 1.39 sen compared to 1.44 sen a year ago.

Grand-Flo proposed a final dividend of 1.2 sen per share, comprising a gross dividend of 0.037 sen per share and a tax exempted dividend of 1.163 sen per share for foteh financial year ended Dec 31, 2011. Grand-Flo said that in line its results, it proposed to set a dividend policy to distribute a minimum 20% of its net profit as annual dividends to shareholders effective from the financial year ended Dec 31 2011, subject to shareholders' approval.



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Kencana unit gets RM460m EPCC job from Murphy Sarawak

KUALA LUMPUR (May 8): KENCANA PETROLEUM BHD []'s unit Kencana HL Sdn Bhd has been awarded RM460 million engineering, procurement, CONSTRUCTION [] and commissioning (EPCC) contract from Murphy Sarawak Oil Co Ltd.

In a statement on Bursa Malaysia on Tuesday, Kencana said that its subsidiary had received a letter of award from Murphy for the fabrication of offshore topsides.

“It is estimated value of the contract is between RM460 million to RM474 million and is expected to commence in the first half of 2013.”

"The Contract is expected to contribute positively to the earnings and net assets per share of Kencana Petroleum Group for the duration of the Contract," it said.



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Stocks to watch Kencana, Pantech, Spritzer, KNM, Silver Bird

KUALA LUMPUR (May 1): The FBM KLCI could be range bound when trading resumes on Wednesday after May Day holiday on May 1, given the absence of fresh catalysts.

The FBM KLCI fell some 25.72 points in April, as investor sentiment took a beating given rising external and domestic uncertainties.

Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan said he expects the FBM KLCI to trend lower in response to rising solvency risk and borrowing cost in Europe (Spain & Italy) and rising local political uncertainties.

“Despite positive comments from the USA Fed on possible monetary stimulus, a weaker than expected read on April Euro zone sentiment and rising European bond yield seemed to bring struggling European growth and debt concerns back into focus.

Most markets in Asia and Europe were closed on Tuesday to mark the May Day holidays and the Monday close at Wall Street was less then encouraging as The S&P 500 posted its first monthly decline since November on Monday, as stocks slipped in one of the lightest trading days of the year on signs the U.S. economy may be slowing and as a recession in Spain highlighted risks in the euro zone.

The Dow Jones industrial average dropped 14.68 points, or 0.11 percent, to 13,213.63. The Standard & Poor's 500 Index fell 5.45 points, or 0.39 percent, to 1,397.91. The Nasdaq Composite Index lost 22.84 points, or 0.74 percent, to 3,046.36.

Among the stocks that could be in focus on Bursa Malaysia are KENCANA PETROLEUM BHD [], PANTECH GROUP HOLDINGS BHD [], SPRITZER BHD [], KNM GROUP BHD [] and SILVER BIRD GROUP BHD [].

Kencana Petroleum Bhd’s wholly owned subsidiary, Kencana HL Sdn. Bhd. ("Kencana HL") in consortium with Shinryo (M) Sdn Bhd has secured an engineering, procurement, CONSTRUCTION [] and commissioning (“EPCC”) from PETRONAS GAS BHD [].

Kencana said on Monday that the contract was for the EPCC of two cogeneration plants, having combined capacity of 50MW of electrical power and steam capacity of 120 ton per hour.

The company said the portion of the contract value for Kencana HL was estimated at RM35 million.

Pantech Group Holdings Bhd Net profit for the fourth quarter ended Feb 29, 2012 surged 90% to RM10.68 million from RM5.11 million a year earlier, due mainly to an increase in revenue.

The company said on Monday that its revenue for the quarter jumped 76.2% to RM128.45 million from RM72.9 million in 2011 due to improved sales demand from oil and gas sector with the on-going new projects.

Earnings per share rose to 2.37 sen from 1.14 sen, whiel net assets per share was 75 sen.

Pantech proposed a final single tier dividend of 1.3 sen per share 20 sen each amounting to RM5.84 million for the financial year ended Feb 29, 2012, subject to shareholders' approval.

Spritzer Bhd net profit for the third quarter ended Feb 29, 2012 jumped 69.4% to RM3.66 million from RM2.16 million a year earlier, due mainly to higher sales of more profitable carbonated and flavoured drinks and natural mineral water products.

The company said on Monday that its revenue for the quarter rose 33% to RM45.22 million from RM34.09 million in 2011 on higher sales volume.

KNM Group Bhd (KNM) has proposed to undertake a fund raising exercise involving a Rights Issuance of RM200 million.

In a filing to Bursa Malaysia Securities Bhd on Monday, KNM said the definitive terms for the Rights Issue would be determined by the Board of the Company subject to the advice of the Company’s Corporate Advisors to be appointed in due course.

Silver Bird Group Bhd’s proposed group restructuring scheme is expected to be finalised by the middle of May 2012 said Silver Bird Group’s chairman of audit committee, Richard Azlan Abas after the company’s AGM on Monday.

“The group restructuring plan will include, but not limited to, capital reduction, share consolidation, rights issue and debt restructuring. However, it is still in its preliminary stage and very fluid. We hope to finalise the proposed plan once we get an agreement from the major stakeholders by the middle of May.” he added.

When asked about the amount of rights issue which the company intends to raise for its restructuring plan, Richard said it would amount to RM60 million.



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Kencana unit gets EPCC contract from Petronas Gas worth RM35m

KUALA LUMPUR (April 30): KENCANA PETROLEUM BHD []’s wholly owned subsidiary, Kencana HL Sdn. Bhd. ("Kencana HL") in consortium with Shinryo (M) Sdn Bhd has secured an engineering, procurement, CONSTRUCTION [] and commissioning (“EPCC”) from PETRONAS GAS BHD [].

Kencana said on Monday that the contract was for the EPCC of two cogeneration plants, having combined capacity of 50MW of electrical power and steam capacity of 120 ton per hour.

The company said the portion of the contract value for Kencana HL was estimated at RM35 million.

“The Contract is expected to be fully completed by first quarter of calendar year 2014,” it said.

Kencana said the contract was expected to contribute positively to its earnings for the duration of the contract.



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Stocks to Watch Kencana, SapuraCrest, Oriental, KAF, BAT

KUALA LUMPUR (April 23): Malaysian stocks may see further weakness on Tuesday against less-optimistic fundamental and technical indicators. Analysts have a downside-bias perception on the FBM KLCI in anticipation that global economic data and Malaysia's pre-election sentiment could curb gains across the 30-stock benchmark.

Crucial global highlights this week include potential indications of further quantitative easing by US policymakers, and China's monetary policy, results from which will influence the direction of global financial markets.

The spotlight also falls on Europe after the Flash Purchasing Manager's Indexes for Europe indicated a quicker pace of economic decline for the region. These global updates have resulted in a sell-off across Asian stockmarkets.

The FBM KLCI fell 8.05 points to 1,583.8 on Monday.

Stocks to watch on Tuesday include KENCANA PETROLEUM BHD [], SAPURACREST PETROLEUM BHD [], ORIENTAL HOLDINGS BHD [], KAF-Seagroatt & Campbell Bhd, and BRITISH AMERICAN TOBACCO (M) [] Bhd (BAT).

Shares of Kencana and SapuraCrest rose on news that trading of both stocks will be suspended beginning May 2 to facilitate the capital repayment exercises by the oil and gas support service providers. The capital repayment is in conjunction with the merger of both firms under a new-listed entity, SapuraKencana Petroleum Bhd.

Diversified entity Oriental trades ex-dividend on Tuesday. The company — the portfolio of which includes automotive, property and PLANTATION []s — plans to reward shareholders with a single-tier interim dividend of 3% for the financial year ended Dec 31, 2011. The final lodgement day is this Thursday.

KAF's third quarter (3Q) net profit more than doubled from a year earlier, as the stockbroking firm registered higher non-operating gains, which mitigated the impact of lower revenue and higher operating expenses. In a statement to the exchange on Monday, KAF said net profit came to RM8.62 million in the quarter to Feb 29, 2012 versus RM4 million a year earlier. Revenue fell 15% to RM7.18 million from RM8.45 million.

BAT's net profit rose 9% to RM194.51 million in the first quarter ended March 31, 2012 from RM178.56 million a year earlier, helped by higher revenue and lower operating expenses. The company said revenue rose 5% to RM1.04 billion from RM992.15 million. The tobacco firm plans said it plans to reward shareholders with a first interim tax-exempt dividend of 65 sen a share for the current financial year ending Dec 31, 2012.



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Kencana, SapuraCrest rally ahead of trading suspension

KUALA LUMPUR (April 23) : Shares of KENCANA PETROLEUM BHD [] and SAPURACREST PETROLEUM BHD [] rose on news that trading of both stocks will be suspended beginning May 2 to facilitate the capital repayment exercises by the oil and gas support service providers.

The capital repayment is in conjunction with the merger of both firms under a new listed entity SapuraKencana Petroleum Bhd.

Kencana shares climbed as much as 4% or 13 sen to RM3.33, a record high since the company’s listing in December 2006. The stock traded lower at RM3.29 at lunch break with some 5.1 million shares changing hands.

SapuraCrest added as much as 3% or 14 sen to RM5.04 before settling lower at RM5 with 331,900 shares done.

In separate statements to the exchange on Monday, SapuraCrest and Kencana said the trading suspension will take place until the delisting of both firms from the exchange. The ex-date for the capital repayment falls on May 4 while the entitlement date is on May 8.



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SapuraCrest targets Brazil’s oil and gas sector with Seadrill

KUALA LUMPUR (March 22): SAPURACREST PETROLEUM BHD [] is looking to expand its operation in Brazil's oil and gas services industry via its joint venture with Seadrill Ltd, said its group's chief executive Datuk Shahril Shamsudin.

SapuraCrest, which is in a merger deal with KENCANA PETROLEUM BHD [], had on Thursday received its shareholders approval for a joint venture with Seadrill.

The JV agreement with Seadrill was in relation to the contract to charter and operate three units of pipe laying support vessels by Petroleo Brasileiro (Petrobras) worth US$1.4 billion.

Shahril said on Thursday that with the JV formalised, SapuraCrest would be looking to expand its operation in Brazil's oil and gas services industry, as the nation is investing a lot to make the country's oil and gas industry "as effective as we have here in Malaysia".

"We are looking forward for another bid in Brazil, together with the same partner," he told reporters after the EGM at Sapura's headquarters in Seri Kembangan.

Shahril said currently, the group has put in about RM5 billion of bids.

He expected the merger with Kencana would increase the group's capability and balance sheet capacity to take on more challenging jobs such as the development of marginal oil fields.



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Stocks to watch: Silver Bird, MAS, Proton, Ekovest

KUALA LUMPUR (March 1): Blue chips could extend their gains on Thursday, as regional market sentiment would receive the boost after the European Central Bank provided 530 billion euros (US$711 billion) of cheap funding for banks.

The ECB's Long Term Refinancing Operation (LTRO) has been a major factor behind the rally in European equities since the turn of the year.

A total of 800 banks borrowed money at the tender, the second round of three-year funds, with demand exceeding the 500 billion euros expected by traders polled by Reuters.

At Bursa Malaysia, the FBM KLCI was up 12.92 points or 0.83% to close at 1,569.65, its highest since July 2011.

However, the losses from MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) and PROTON HOLDINGS BHD [], which were expected by the market, could have some impact.

SILVER BIRD GROUP BHD [], which resumes trading on Thursday, cautioned investors in the trading of its securities after the auditors have expressed a disclaimer opinion on the company’s latest audited accounts for the financial year ended Oct 31, 2011.

Silver Bird Group suspended its group managing director, Datuk Tan Han Kook and two other key executives effective Feb 24 as it undertakes an internal inquiry into allegations of irregularities in the company’s accounts.

Meanwhile, MAS posted net losses totaling RM1.277 billion in the fourth quarter ended Dec 31, 2011 versus net profit of RM225.92 million a year ago as it severely affected by high fuel costs and non-fuel expenses.

Proton posted heavier net losses of RM88.20 million in the third quarter ended Dec 31, 2011 compared with the net loss of RM60.10 million a year ago due to a decline in year-end sales.

Other stocks to watch are SIME DARBY BHD [], KENCANA PETROLEUM BHD [], MAH SING GROUP BHD [], and EKOVEST BHD [].

Sime Darby reported net profit of RM1.10 billion in the second quarter ended Dec 31, 2011. For the first half, it reported a 42% increase in net profit to RM2.175 billion from RM1.531 billion in the previous corresponding period.

Kencana Petroleum Bhd has secured a RM74 million contract from ExxonMobil Exploration and Production Malaysia (EMEPMI) to fabricate the substructure for a platform off Terengganu.

Mah Sing Group Bhd expanded its land bank with the latest acquisition of 157 acres (63.4 ha) in Bandar Kundang, Gombak for RM40.94 million about RM6 per sq ft. It proposed to build a self-contained, secured lifestyle township named M Residence 2@Rawang with a gross development value of about RM650 million.

Ekovest's earnings soared 615.82% to RM11.31 million for its second quarter ended Dec 31, 2011, from RM1.58 million a year ago, due to increased revenue from its CONSTRUCTION [] arm.

Malaysia Steel Works (KL) Bhd posted net losses of RM13.33 million in the fourth quarter ended Dec 31, 2011 compared with net profit of RM8.99 million a year ago. For the financial year ended Dec 31, 2011, it was still profitable, with net profit of RM24.53 million, or down 12.6% to RM24.53 million from RM28.09 million in FY10.

Poultry-based TEO SENG CAPITAL BHD [] posted a 12.95% increase in its profits to RM7.15 million for the third quarter ended Dec 31, 2011, from RM6.33 million a year ago, underpinned by larger sales of eggs and better prices.



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Kencana secures RM74m fabrication job from ExxonMobil

KUALA LUMPUR (Feb 29): KENCANA PETROLEUM BHD [] has secured a RM74 million contract from ExxonMobil Exploration and Production Malaysia (EMEPMI) to fabricate the substructure for a platform off Terengganu.

The company said on Wednesday its unit Kencana HL Sdn. Bhd was awarded the contract to fabricate the substructures which include jacket, piles and related components which formed part of Tapis R central processing platform for the Tapis re-development project off the coast of Terengganu.

“The total value of the contract is approximately RM74 million. It is a one-off EPC contract and is expected to be delivered to EMEPMI within the second quarter of calendar year 2013,” it said.



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Stocks to watch: Sentoria, AirAsia, Hartalega, WCT, Kencana, TSH, MISC, KLK, Perisai

KUALA LUMPUR (Feb 23): Property developer Sentoria Group Bhd will be the stock to watch on Thursday, when it makes its debut on the Main Board of Bursa Malaysia.

The property developer is the first company to list in 2012.Its offer of 20 million new shares at an 85 sen each to the public was oversubscribed by 5.4 times.

RHB Research Institute had accorded a fair value of 92 sen based on a 30% discount to its sum-of-parts valuation.

Other stocks which could see trading interest following fresh corporate developments and financial results include AIRASIA BHD [], HARTALEGA HOLDINGS BHD [], WCT BHD [], KENCANA PETROLEUM BHD [], TSH RESOURCES BHD [], MISC BHD [], KUALA LUMPUR KEPONG BHD [] (KLK) and PERISAI PETROLEUM TEKNOLOGI [] Bhd and IJM CORPORATION BHD [].

AirAsia’searnings fell 56.3% to RM135.66 million in the fourth quarter ended Dec 31, 2011 when compared with RM311.08 million a year ago as it was impacted by aircraft fuel expenses, which rose to RM475.07 million from RM292.44 million on-year.

It recorded foreign exchange losses of RM137.38 million compared with forex gain of RM44.29 million a year ago.

For the financial year ended Dec 31, 2011, its net profit fell 46.8% to RM564.14 million from RM1.06 billion in FY10.

Nitrile latex glove maker Hartalega’s earnings rose 3% to RM50.70 million in the third quarter ended Dec 31, 2011 from RM49.20 million a year ago. For the nine months ended Dec 31, 2011, net profit increased 10% to RM151.60 million from RM137.76 million.

It proposed a bonus issue of up to 371.65 million 50 sen shares on a one-for-one basis and free warrants issue of up to 74.331 million free warrants on the basis of one free warrant for every five existing shares held on the entitlement date.

WCT secured a RM331 million contract for a mixed commercial project with a medical centre in Kota Kinabalu.

Kencana secured a RM101 million contract from Murphy Sarawak Oil Co. Ltd for two offshore platforms in Sarawak.

TSH Resources Bhd posted record net profit of RM120.54 million in the financial year ended Dec 31, 2011, an increase of 43% from the RM84.28 million a year ago and its expects the Indonesian oil palm estates to boost future earnings.

As for the fourth quarter ended Dec 31, 2011, net profit fell 39.8% to RM26.15 million from RM43.45 million. TSH said the reduction was primarily due to a foreign exchange loss of RM10.962 million and a RM7.291 million reduction in contributions from jointly controlled entities

MISC suffered net loss of RM1.74 billion in the third quarter ended Dec 31, 2011 compared with net profit of RM1.38 billion a year ago due to recognition of one-off provisions totalling RM1.45 billion.

For the nine-month period, MISC recorded a net loss of RM1.481 billion due to the recognition of one-off provisions totalling RM1.452 billion following its recent decision to exit from the liner business.

Kuala Lumpur Kepong recorded a 12.1% increase in earnings to RM340.98 million in the first quarter ended Dec 31, 2011, boosted mainly by its PLANTATION []s business, when compared with RM304.18 million a year ago.

Perisai’s net profits soared 106.8% to RM21.28 million for the financial year ended Dec 31, 2011 from RM10.25 million a year ago, boosted by profit contributed by the Intan Group, which it acquired in August last year. For the year ended Dec 31, 2011, its revenue was up 9.6% to RM82.41 million from RM75.21 million a year ago.

For the fourth quarter ended Dec 31, 2011, Perisai’s earnings 62.3% to RM11.21 million from RM6.93 million.

IJM Corporation’s earnings rose 5.7% to RM135.23 million in the third quarter ended Dec 31, 2011 from RM127.96 million a year ago. Its revenue chalked up 30.1% increase to RM1.172 billion from RM901.34 million. Earnings per share were 9.81 sen compared with 9.47 sen.

IJM Corp said for the nine-month period, its net profit was 1.1% higher at RM325.04 million from RM328.83 million. Its revenue rose at a stronger pace of 23.6% to RM3.303 billion from RM2.672 billion.



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Kencana gets RM101m offshore platforms job from Murphy

KUALA LUMPUR (Feb 22): KENCANA PETROLEUM BHD [] has secured a RM101 million contract from Murphy Sarawak Oil Co. Ltd for two offshore platforms in Sarawak.

It said on Wednesday its unit Kencana HL Sdn Bhd was awarded the engineering, procurement and CONSTRUCTION [] (EPC) contract for the construction of two offshore platforms - the Patricia and Serendah platforms - which are part of the SK309 field development near Bintulu.

"The contracts are expected to contribute positively to the earnings of Kencana Petroleum Group for the financial year ending July 31, 2012 and financial year ending 2013," it said.

Kencana said that construction would start in the first quarter of 2012 and end in the third quarter.



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SapuraCrest-Kencana merger is 'best deal'

The SapuraCrest-Kencana Petroleum RM11.85 billion merger and acquisition (M&A) deal has won the "Best Deal/Most Innovative Deal in Southeast Asia in 2011" award from the Alpha Southeast Asia magazine.

The Hong-Kong based investment magazine announced the winners here last week for its annual Deal and Solution Awards 2011.

In a statement today, it said the award was aimed at recognising the best and most innovative corporate-centric investments and commercial banking solutions in the Southeast Asia region.

It said the M&A demonstrated that strategy diversification and an enhanced balance sheet for the integrated oil and gas service was fundamental in winning the the most innovative deal in the region in 2011.

CIMB Investment Bank and Maybank Investment Bank were among the financial advisers for the deal. Both the banks and RHB Investment Bank were also among the honour call for "Best Equity/IPO Deal of the Year in Southeast Asia in 2011" for their capital fundraising efforts in offshore support vessel operator, Bumi Armada's US$888 million initial public offering.

The government of Malaysia also received a borrower/issuer award for "Best Islamic/Most Innovative Islamic Finance Deal in Southeast Asia in 2011".

Meanwhile, a full write-up including all the winners involved in the transactions and awards rationale for the year 2011 is available in the December/January issue of Alpha Southeast Asia magazine. -- Bernama



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Kencana Petroleum going the extra mile

Kencana Petroleum Bhd (Feb 14, RM3.16)
Maintain buy with revised target price of RM3.66 from RM3.65: Kencana remains our top conviction “buy” in the oil and gas sector for 2012.

On a stand-alone basis, Kencana is a stock with strong earnings visibility and offers the best exposure to Petroliam Nasional Bhd’s domestic capital expenditure programme in fabrication, drilling and marginal field/enhanced oil recovery (EOR) projects.

We believe Sapura Crest-Kencana Petroleum (Newco) is highly likely to be featured in the KLCI FBM 30 come the next revision in June 2012, a positive in our view, in drawing higher interest and ratings.

Our marginally revised target price of RM3.66 offers a 15% upside from current levels.

We believe Kencana could be a major winner of the Petronas jobs, ahead of its domestic peer Malaysia Marine and Heavy Engineering Holdings Bhd (“hold”, target price [TP]: RM5.70), for it has the advantage of having ample yard space to take up more jobs. It is in the enviable position of being able to clinch most of Petronas Carigali Bhd, Hess, Nippon Oil and Murphy’s platform projects. We estimate total domestic orders to be worth up to RM5 billion this year.



We project Kencana will secure RM2 billion in job wins (+100% year-on-year) in 2012.

Construction of two new tender-assisted rigs — estimated total cost of US$400 million (RM1.2 billion) — is underway, with delivery targeted in 4Q13 and 1Q14.

This is in anticipation of strong domestic drilling requirements in 2013/14. With a pick-up in the marginal fields/EOR programme, demand for floating solutions (mobile offshore production unit) is equally strong.

Kencana could capitalise on this, as it has secured two old jack-ups for conversion. The likelihood of securing contracts is high.

We have raised FY14 forecast by 8%, taking into account the partial contribution of the KM-2 rig. Stronger growth is visible from FY15 onwards, as Kencana will fully recognise contributions from two new rigs (KM-2, KM-3) and potentially two Mopus as well.

Meanwhile, the plan to list Newco is on track to meet the April deadline. Kencana shareholders will get 1.26 Newco shares plus 48.6 sen in cash for every share held. Based on our TP of RM2.52 for Newco (20 times 2013 earnings per share), we derive a TP of RM3.66 for Kencana. — Maybank IB Research, Feb 14


This article appeared in The Edge Financial Daily, February 15, 2012.



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Sarawak gas finds to spur new investments

Oil and gas sector
Maintain overweight: Petroliam Nasional Bhd (Petronas) has made two new big gas discoveries offshore Sarawak with estimated recoverable reserves of almost four trillion standard cubic feet (TSCF), an estimated 4% of Malaysia’s current natural gas reserves of 14.8 billion barrels of oil equivalent. The gas finds were at the Kasawari and NC8SW fields in Block SK316 off Sarawak, through exploration wells Kasawari-1 and NC8SW-1. These are the latest wells drilled in Block SK316 which are part of Petronas’ strategy to intensify domestic exploration and prolong its reserves.

The Kasawari-1 well was drilled last November and gas was found in the carbonate reservoirs. The well, drilled to a depth of 3,196m, penetrated about 1,000m of gas column — the longest drilled section of gas column in the country. The well test produced 29 million standard cu ft per day of gas. Preliminary assessments conducted early this month indicate that the gas-in-place for the Kasawari field is over five TSCF, with an estimated recoverable hydrocarbon resource of just over three TSCF — which is one of the largest non-associated gas fields in Malaysia. The NC8SW-1 well, located about 17km south of Kasawari, was drilled last September to a total depth of 3,853m. Gas was found in a 440m column in similar carbonate reservoirs, which are estimated to have recoverable reserves of over 450 billion standard cu ft. Petronas said the NC8SW-1 well discovered potential oil play which requires further evaluation to determine its commercial viability.

While these new gas finds would need another three to five years of analysis and interpretation of seismic data before progressing to the initial development phase, they continue to fuel excitement for oil and gas investments in Sarawak, a major gas producer and exporter with the country’s only liquefied natural gas plant in Bintulu.

Over the next 12 months, we expect Shell’s massive enhanced oil recovery projects in the Baram Delta off Sarawak to gain prominence. These projects involve the Bokor, Bakau, Baram, Baronia, Betty, Fairley Baram, Siwa, Tukau and West Lutong oilfields.

But over the next six months, we expect fresh news from Petronas’ RM15 billion fast-tracked programme to develop gas reserves from a cluster of fields in the North Malay basin, off Peninsular Malaysia. This project is expected to commence production towards the end of 2013. Initial beneficiaries of the North Malay basin development will be fabricators such as Malaysian Marine and Heavy Engineering Holdings Bhd (MMHE), Kencana Petroleum Bhd, SapuraCrest Petroliam Bhd and Dialog Group Bhd. UMW’s oil and gas division, which provides oil country tubular goods and pipelines and rig services, and Wah Seong Corp Bhd for gas compression modules and pipe-coating services, could likewise benefit.

We remain excited about the sector given Petronas’ massive capital expenditure programme of RM300 billion over the next five years involving enhanced oil recovery, marginal fields and cluster/deepwater developments towards maintaining its oil and gas production. We remain “overweight” on the sector and retain our “buy” calls on MMHE, Bumi Armada Bhd, Dialog, SapuraCrest, Kencana Petroleum and Petronas Gas Bhd. — AmResearch, Feb 14


This article appeared in The Edge Financial Daily, February 15, 2012.



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SapuraCrest-Kencana merger may list in Mar

The proposed listing of a combined SapuraCrest and Kencana Petroleum Bhd in Malaysia has been delayed to end-March or early April, a source told Reuters on Wednesday.

The planned merger of the Malaysian oil and gas services firms, the largest in the Malaysian oil and gas sector, was scheduled to list the combined entity by end-February, but has been delayed because the companies are awaiting court approval on certain aspects of the deal.

“We are still waiting for the high court to approve some outstanding processes for the merger to go ahead,” said the source, who could not be identified because he is not authorised to speak to the media. - Reuters



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Firm start for February, volume surges to 2.6 bn units

KUALA LUMPUR (Feb 2): Stocks on Bursa Malaysia closed on a firm note on Thursday, with the FBM KLCI advancing nearly 16 points, supported by gains in bigger capitalised stocks including Maybank, Public Bank, conglomerate Sime Darby and DiGi.

Trading volume was high with nearly 2.6 billion units transacted in a market which also saw active trade in smaller capitalised stocks. The broader market was firmer, with advancing counters beating decliners more than two to one.

At 5pm, the 30-stock KLCI was up 15.8 points to 1,537.09 and year-to-date, it is up 3.37%. Turnover was 2.58 billion shares valued at RM2.86 billion. There were 643 gainers, 286 losers and 298 counters unchanged.

Among the key regional markets, Hong Kong’s Hang Seng Index closed up 2% at 20,739.45. The China Enterprises Index of top mainland listings in Hong Kong ended up 2.93% at 11,583.47. The Shanghai Composite Index finished up 1.96% at 2,312.56.

Japan’s Nikkei 225 rose 0.76% to 8,876.82 while Taiwan’s Taiex added 1.37% to 7,652.46 but Singapore’s Straits Times Index reversed into the red in late trade, down 0.06% to 2,903.04.

Meanwhile, European shares hit a six-week high on Thursday adding to solid gains after global manufacturing data eased fears about the growth outlook, but with Greek debt talks unresolved, gains were limited.

OSK Research said it indeed the KLCI performs well over the next 15 days in line with a global rally, it would be forced to rethink our bearish view for 1H12.

“Instead, we may upgrade our call on the market to a NEUTRAL from the current Sell, and may well promote more cyclical sectors such as Oil & Gas and CONSTRUCTION [].

“While the market may subsequently turn south after a 1Q rally, still the flush of liquidity in the system may keep it resilient for most of the year. For now, we remain Defensive with Consumer stocks and other defensive mid-cap plays likely to outperform still in the short term,” it said.

Among the index-linked stocks, DiGi rose 14 sen to RM4.10, adding 2.58 points to the KLCI. Maybank added 14 sen to RM8.34, Public Bank 20 sen to RM13.74, pushing the index up by 2.48 points and 2.23 points. Sime Darby’s 14 sen gain to RM9.28 added nearly two points.

Hartalega was the top gainer, adding 41 sen to RM7.63, deemed a favourite among glove maker while among PLANTATION []s, United Plantations added 36 sen to RM20.70, SOP 29 sen to RM6.44 and PPB 26 sen to RM17.22.

Among oil and gas players, SapuraCrest jumped 32 sen to RM5.18 and Kencana 17 sen to RM3.29 ahead of the completion of their merger.

Among the decliners were Glenealy, down 15 sen to RM7.22 with 12,100 shares but the RM7.50 takeover price by Samling provided the support for the plantation stock which had run up earlier this week.

RHB Cap fell 14 sen to RM6.98, TDM 11 sen to RM4.57 and KLK 10 sen to RM25.60.



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More capex to fuel O&G sector in 2012

The aggressive inflow of capital expenditure (Capex) into the development of marginal oil and gas (O&G) fields or enhanced oil recovery projects by Malaysian O&G players, is set to continue in 2012.

Over the past 12 months, national O&G entity, Petronas Bhd, has been busy boosting production not only to catch up with the previous year's higher output, but also achieve this more efficiently, said OSK Research.

The firm added that the national oil corporation's total O&G production had dropped to 2.1m boe/day in financial year 2011 from 2.3m boe/day previously,

"Hence, Petronas together with its production sharing contract (PSC) parties, has been progressively pouring Capex into the development of marginal O&G fields or enhanced oil recovery (EOR) projects.

"Both types of projects are expected to help it meet its higher O&G output objective in the shortest possible time and also at a lower production cost vis-a-vis the greenfields or more sophisticated fields," OSK Research said.

The research firm also predicts that more marginal oilfields will be awarded in 2012.

In 2011, Petronas awarded two clusters of marginal O&G fields, namely the Berantai cluster to Kencana and SapuraCrest, and the Balai cluster to Dialog Bhd.

These fields are fast-track projects that are expected to commence O&G production in one or two years, against the more sophisticated deepwater fields, which may take between three-five years to kickstart.

"Going forward, there are numerous new development opportunities, since Petronas intends to develop about 25 per cent of the 100 remaining marginal O&G fields identified," OSK Research said.

It added that given the exposure and experience, it will not be surprising if once again, Kencana, SapuraCrest and Dialog, are awarded the projects.

Also, next year, the focus on enhanced oil recovery (EOR) projects are slated to continue.

This is because the additional Capex needed to extract the remaining O&G is far less than that for a greenfield.

Recently, Petronas and Shell signed a Heads of Agreement for two 30-year production sharing contracts, involving EOR projects offshore Sabah and Sarawak.

OSK Research said the future growth of the sector is more likely to be via mergers and acquisitions.

"We think that growth through acquisitions or mergers is more likely compared to organic growth, as the O&G industry is becoming more dynamic.

"Companies are required to provide a complete range of services as well as deliver them reliably and in a timely manner.

"Petronas and its production sharing contract parties would rather place the main project responsibility on a single O&G contractor to get the entire job done, than award smaller portions to multiple contractors, which may give rise
to a risk of delivery delays and cost overruns.

"As such, we believe there may be a consolidation among the vessel players and brownfield services providers," the research house said. -- Bernama



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SapuraCrest-Kencana plans RM1.4b capex for 2 years

KUALA LUMPUR: The merged entity between SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd will allocate RM1.4 billion as capital expenditure over the next two years.

Speaking at a media briefing after the SapuraCrest EGM yesterday, group president and CEO Datuk Seri Shahril Shamsuddin said the capex would be used for expansion into Australia, Brazil and the Middle East.

He said the merged entity to be named Sapura Kencana Bhd will have an order book of about RM13 billion upon the merger. SapuraCrest’s order book is currently around RM4 billion to RM5 billion, he said.

At the EGM, Shahril said 99.5% of SapuraCrest’s shareholders are in favour of the proposed merger with Kencana.

Shareholders also approved SapuraCrest’s proposed acquisition of Australia-based Clough Ltd’s marine construction and offshore engineering operations in Australia, the UK and US for RM409 million in cash. Shahril said Clough will start contributing to SapuraCrest immediately as it has contracts in hand of over RM1 billion.

Clough’s acquisition has now given SapuraCrest the capabilities to lay flexible pipelines and umbilicals for deepwater projects, said Shahril.

Post merger, Shahril said the immediate task is to integrate the workforce between the two companies. This will be the focus for the first three to five months, he said, adding that SapuraCrest and Kencana plan to increase their skilled workforce by 15% to 20%.

At the same time, both companies will also streamline their operations upon the merger. “We will start by putting the businesses that overlap into single business units. We will then make sure they run efficiently,” said Shahril.

Shahril: We are able to go to the oil companies and offer them a one-stop shop.

He said the merger will allow SapuraCrest to become a fully integrated oil and gas services company, with an expanded suite of services that include engineering, procurement, construction, installation and commissioning (EPCIC) capabilities.

“We are able to go to the oil companies and offer them a one-stop shop,” he said, adding that there are only three to five companies globally that are able to do this.

With a combined balance sheet, he said SapuraCrest and Kencana will be able to take on larger projects. “It is very difficult for a company with a RM100 million paid-up [capital] to bid for a RM10 billion job,” he said.

The combined balance sheet of both companies will have a gearing of 1.1 times and RM1.3 billion cash. The merger was announced in July.

Under a cash and share swap deal, Integral Key Bhd (IKB), a special purpose vehicle, will acquire all assets and liabilities of SapuraCrest for a total consideration of RM5.87 billion, equivalent to RM4.60 per share. The total consideration is to be distributed to shareholders by the first quarter of 2012 when the merger is expected to be completed with the listing of IKB.

As for Kencana, IKB was offering RM5.98 billion or RM3 per share. Kencana will hold its EGM today for the approval of the merger.

SapuraCrest closed nine sen higher to RM4.41 yesterday with 4,324,700 shares transacted.


This article appeared in The Edge Financial Daily, December 15, 2011.



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Kencana 1QFY11 profit up 31%

KUALA LUMPUR: Kencana Petroleum Bhd saw net profit for its 1QFY11 ended Oct 31 increase 31% from the preceding quarter to RM83.54 million from RM63.72 million due to the addition of a new subsidiary.

The company said its higher earnings were due to the full-quarter contribution from Allied Marine and Equipment Sdn Bhd (AME), which it acquired in July through a share swap arrangement.

Kencana also recorded strong improvement in its contracts on a bigger order book and the better management of the relevant costs.

Year-on-year, its net profit grew nearly 60% from RM52.36 million in the previous corresponding quarter. Meanwhile, revenue rose 69% to RM569.9 million from RM336.9 million a year ago.

AME was acquired for RM400 million in a share swap. It provides offshore diving and underwater-related services for the inspection, repair and maintenance of structures, pipelines and risers for the construction of underwater facilities for the oil and gas industry.

Kencana said in an earlier announcement that the acquisition of AME would enable it to earn recurring revenues and potential cost synergies.

AME has undertaken projects in Malaysia, Indonesia, Vietnam, China and India.

The acquisition came with a guarantee that AME’s audited consolidated profit after tax for each of the years ending Sept 30, 2011 and 2012 reach a minimum of RM40 million.

Last week, Kencana announced it had won a RM1 billion contract from Bechtel International Inc to fabricate and assemble a liquefied natural gas processing facility in Australia.

The company received a buyout offer from Integral Key Bhd for RM5.87 billion or RM4.60 per share, as part of a plan to merge Kencana with SapuraCrest Petroleum Bhd.

Both shares of Kencana and SapuraCrest reached a near four-month high yesterday. Kencana gained four sen to end at RM2.79 while SapuraCrest closed nine sen higher at RM4.41.


This article appeared in The Edge Financial Daily, December 15, 2011.



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Kencana-SapuraCrest targets CAGR of 15% to 20% in revenue

KUALA LUMPUR: The final hurdle in the merger of KENCANA PETROLEUM BHD [] and SAPURACREST PETROLEUM BHD [] was crossed on Thursday after Kencana’s shareholders gave their approval at its EGM.

Kencana group chief executive officer Datuk Mokhzani Mahathir told reporters that the merged entity -- Sapura Kencana Bhd -- was looking at a compound annual growth rate of 15%to 20% for revenue.

The merger was expected to completed by end-February 2012 and it was on track to being listed in the first quarter of 2012 pending regulatory approvals.

He said the merged entity would have 9,000 people on its payroll globally across 20 countries ranging from Malaysia, Thailand, Brazil, the US and India to Australia.



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